Entrepreneurs regulatory compliance costs are 45% more than the Bigs – Post No. 081008-2

WASHINGTON, D.C. – while small businesses have historically powered the nation’s economy with innovation and expansion, today they face a combination of complex regulations and spiraling regulatory compliance costs that undermine their success.  Today, the House Committee on Small Business Subcommittee on Regulations, Health Care and Trade examined needed regulatory reforms to aid small firms as they work to grow the economy and create jobs.

“Small businesses are critical to our economy’s health and we should be giving them every possible opportunity to thrive,” said Chairman Gonzalez. “Complex and burdensome regulations mire small firms in costly and time intensive paperwork, holding them back from achieving their highest potential.”

Relative to large corporations, small businesses bear an unusually high burden with respect to federal regulations. Witnesses before the committee testified that in order to keep their doors open for business; entrepreneurs face regulatory compliance costs that are 45% more than their larger counterparts.  Tax regulations required 67% more in terms of costs for small firms, representing a disproportionate share of the estimated $1.1 trillion in compliance costs annually.

Since 1980 the Regulatory Flexibility Act (RegFlex) mandated that federal agencies consider and review economic impacts on small firms. During the hearing, Committee members assessed efforts by the Office of Advocacy at the Small Business Administration to minimize regulatory burdens on entrepreneurs through the Regulatory Review and Reform Initiative, also known as “r3.”  The program affords small businesses an opportunity to identify and suggest needed regulatory reforms.

 “When given the opportunity small firms can bolster our economy, but these regulations are costing them their valuable capital and time,” said Chairman Gonzalez.  “Clearly more needs to be done to ensure that regulations do not unfairly burden small firms.”

One of the most significant shortcomings of RegFlex has been the limited number of reviews carried out by agencies.  The House Small Business Committee took an important step towards correcting the regulatory process with passage of the Small Business Regulatory Improvement Act (H.R. 4458).  Introduced by Congressman Brad Ellsworth (D-IN), the bill is the most comprehensive reform effort in a decade to provide new tools for the nation’s 26 million entrepreneurs to navigate the regulatory process. 

“With an economy in distress from high energy prices, high unemployment, and a troubled financial market, we must do all that we can to promote a strong small business sector,” said Chairman Gonzalez. “By breaking down unnecessary obstacles so small ventures can spend more time expanding their businesses-and less time and money complying with regulations-we’ll free our small businesses to help renew our nation’s economic prosperity.”

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